Air France – KLM: Unclear market position the source of many problems

Air France’s ongoing dispute with labor unions has caused more financial woe for the company and its stock price has plummeted. Specifically, the air carrier’s stock price has already fallen by 47% from the start of the year as its financial indicators regarding costs have been disappointing, while its total debt has soared to EUR 12,444m – equal to almost half of its revenues. However, problems at the company go deeper. Its lack of a clear market positioning is a structural problem which is the source of reduced competition and a lack of profitability.

As competition in the airline industry heats up and oil prices rise, financial difficulties are set to worsen. Under these terms, it is certain that Air-France needs to restructure its business by clarifying its market position. Subsequently, the company has to make a clear selection between low-cost services and differentiation over premium services. The ongoing labor dispute is expected to be catalyst for this decision.